Mr. Chairman, Mr. Matsui, Members of the Subcommittee, my name is Darrin Williams. I am the Chief of Staff and Counsel to Arkansas Attorney General Mark Pryor. On behalf of General Pryor and attorneys general all across this country, I would like to thank and commend you for holding hearings on such a timely issue as misleading mailings targeted to seniors.

As you all know, attorneys general are on the front lines battling all types of consumer fraud. Unfortunately, fraud committed against overly trusting seniors is one of the biggest growth industries in America. It has been estimated that seniors are bilked out of nearly $40 billion per year. A significant portion of this amount is the result of deceptive mailings aimed specifically toward seniors. Whether it is a sweepstakes promotion that leads consumers to believe they have won some sort of prize, usually monetary, or a solicitation arriving in a familiar, government-styled envelope with an official-looking seal, seniors are being inundated with confusing and often illegal solicitations.

In Arkansas, last summer, senior African Americans throughout our state were targeted with a flyer purporting that the government was refunding money from the Slave Reparations Act to any living person of "Black ethnic race" born prior to 1928. This flyer was distributed in Black churches, senior communities, nursing homes, and, in some cases, delivered in the mail. It promised senior recipients $5,000 if they supplied their name, address, phone number, Social Security number, and date of birth to the National Victim's Registrar, T.R.E.A. Senior Systems League, P.O. Box 96472, Washington, DC 20090-6472. The flyer stated that the $5,000 in reparations might be attached to the recipient's Social Security benefit check or issued in one lump sum.

After repeated inquiries about the legitimacy of this flyer, Attorney General Pryor opened an investigation. We quickly realized that this scam was being implemented throughout the country, particularly in southern states. Through the combined investigative efforts of the Postal Inspection Service, the Social Security Administration, and our office, we determined that over 20,000 people responded to this misleading flyer soliciting personal identifying information. We discovered that nearly 500 respondents resided in Arkansas. The confusion caused by the flyer hoax was immediately apparent. Many recipients sent photocopies of personal identifying documents, including Social Security cards, driver's licenses, school records, military papers, and birth certificates. Believing the flyer to be a legitimate notice of a government benefit, one person actually sent his original birth certificate, along with a completed flyer.

After people learned that this flyer was a fraud, formal complaints began to pour in to General Pryor. One letter from an unsuspecting victim read, "I answered every question asked to the best of my ability." Another said, "I have been deceived, the attached flyer mislead (sic) me to believe I could have actuality (sic) been due $5,000, if for no other reason than being born before 1927." An adult child of a recipient of this unscrupulous flyer wrote, "My mother was born in 1918 and her hands shake so much she relies on me to handle her correspondence. She has at least four of these things that I know of."

Our investigation led us to TREA Senior Citizens League because it was to their post office box that respondents were asked to send their personal identifying information. The League is a non-profit organization in Alexandria, Virginia, and is an independent subsidiary of the Retired Enlisted Association. They denied having anything to do with the flyers, and thus far, our investigation supports their claims. However, they did take this information and built a database of thousands of seniors' personal identifying data, which they had acquired through the response to these flyers. Moreover, this information was used by the League to produce mailers to each individual responder providing additional information about the League, along with a solicitation for a contribution.

Fortunately, we do not yet have any reports of identity theft or other scams occurring as a direct result of this bogus flyer; however, once this type of information is provided, a con artist can act at leisure. This is why it is so important to educate everyone about the dangers of giving out personal identifying information, particularly one's Social Security number.

Almost 70 years ago, Social Security numbers were established to maintain an accurate record of the earnings of working people. Now, the use of our Social Security numbers has become so pervasive that they are used not only to identify us to our employers, but also to our physicians, our schools, for our bank accounts, and credit card numbers. Your nine digits have become your de facto identifier. Anytime we are required to specifically identify ourselves, those nine digits are demanded.

The Social Security number is the cornerstone of identity theft. In our computerized, information-driven world, the theft of one piece of personal information, such as a Social Security number or driver's license, can lead to out-of-pocket liability, plus hours of frustrating attempts to clean up credit reports, cancel accounts, and to endless explanations to prospective creditors. There are now more than 700,000 reported cases of identity theft every year in the United States, twenty-eight times as many as were reported approximately ten years ago.

Often con artists use bits and pieces of legitimate information to lure their victims. This was true of the Slave Reparations Act scam. In the post-Civil War period, Congress did vote to provide former slaves with "forty acres and a mule" as a form of redress for their years in slavery. However, President Andrew Johnson vetoed the bill. Also contributing to the success of the Slave Reparations scam were news reports that many Black leaders and organizations had either called for, or introduced, legislation to open discussions about reparations. To entice their victims, the perpetrators of the Slave Reparations Act scam used an iota of factual information, coupled with the strong desire among many in the African-American community to at least discuss the effects and possible compensation for the enslavement of their ancestors.

Scams such as this Slave Reparations Act, the "Notch Baby" scam, and others that target our seniors are extremely disturbing. These types of fraud prey upon one of the most vulnerable segments of our society. Many seniors need every penny to pay for essentials and for medications. These seniors are our parents and grandparents. We owe them the protection they deserve.

As America ages, the potential targets of senior scams grow. In Arkansas, almost a half million people are sixty years old or older. This represents nineteen percent of our population, giving us the sixth-highest percentage of seniors in the country. Sadly, nearly one-third of Arkansas seniors live below the poverty level or are classified as "near poor." The Arkansas Delta region has had high, even extreme, rates of poverty for decades. It is a generally more rural area with a higher proportion of African-American residents than the state as a whole. Given our demographics of large populations of poor and senior communities, Arkansas is even more susceptible to misleading solicitations targeted toward seniors. This is one reason Arkansas was one of the first states to adopt enhanced-penalty statutes for consumer fraud targeted toward older consumers.

At the beginning of the 20^th century, there were only three million older Americans. Today, at the dawn of a new century, there are 34.5 million citizens in our nation over the age of 65. This is about one of every eight Americans. And nationally, the older population will continue to grow in the future and will inflate significantly as the "baby boom" generation reaches 65. By 2030, there will be about 70 million older persons living in the United States, more than twice as many as today. They will make up 20 percent of our population.

Through the tough times and the times of prosperity in the last century, it was our seniors who raised families, strengthened our economy, defended our nation, and reaffirmed our deepest values. They are truly the "Greatest Generation." To honor the immeasurable contributions of older Arkansans, and to help them lead independent, active, and fulfilling lives, Attorney General Pryor remains committed to using the programs and services of his office to enhance their quality of life and to protect them from schemes and scams that target this population.

Attorneys General know that the best protection is education. An informed consumer is much less likely to be a victim of fraud. Realizing this and realizing that our seniors are being preyed upon, General Pryor has instituted a "Senior Tour" program. He has taken his office on the road all over the state of Arkansas to speak at senior centers, retirement communities, churches, and civic groups with large senior memberships. This tour is aimed at educating our seniors to prevent them from becoming victims of consumer fraud. General Pryor has also produced a consumer publication geared toward seniors, Consumer Issues: A Guide for Senior Citizens in Arkansas. At every stop on the tour, there are seniors who have been victimized. Second only to telemarketing fraud, deceptive and misleading solicitations, such as the Slave Reparations Act scam, dominate much of the conversation.

When the Slave Reparations Act scam hit Arkansas, General Pryor launched a massive education and information effort, aimed at preventing seniors from being victimized. We produced consumer alerts (attached, Exhibit C) warning people of the scam and directing them not to participate in the hoax. We joined forces with the regional Social Security Administration, state NAACP, African-American legislators, ministers, and media outlets to help get the message out that the Slave Reparations Act flyer was a cruel scam. Additionally, we sent a letter to each of the 463 people who had responded to the flyer (attached, Exhibit D), informing them that it was a hoax and encouraging them to protect their personal information.

Attorneys General across America distribute similar warnings as we do. Although there's no law against private use of a Social Security number, we encourage consumers to take steps to protect their personal information and to know what actions to take if their identity is stolen. Some precautions include the following:

· Limit the amount of information you carry with you in your wallet or purse.

· Guard your Social Security number. You have to provide your Social Security number for employment and tax purposes, but for most other situations, ask to use another number instead.

· Watch your passwords and PINs. Never use your Social Security number, birth date, or other obvious numbers.

· Check your credit report. The sooner you notice irregular transactions, the sooner you can clear up the problem.

· Alert the credit bureaus first if you find that you've been scammed. Then contact the police, banks, and credit card companies.

· If your wallet has been stolen, get new checking and savings accounts. Have new credit cards issued and old accounts noted as "closed at customer's request." Obtain a new ATM card with a new PIN and account numbers.

· To reduce the number of unsolicited credit offers you receive, contact the three credit reporting bureaus and tell them you do not wish to receive pre-approved credit offers. You can do this with a single call to 1-888-5OPT-OUT. If you continue to receive offers, be sure to shred them.

· Get off junk-mail and phone-solicitation lists by signing up for the Direct Marketing Association's Mail Preference and Telephone Preference Services. In those states that have a Do Not Call list (like Arkansas), sign up for these services to prevent telemarketing fraud and to protect your privacy.

Attorneys General will continue to fight for consumers, particularly seniors. They will continue to try to educate consumers. But realistically, while the precautions above are good and will reduce the risk of becoming a victim of identity theft, consumers do not have "real" power to stop it. The key to stopping, or at least to greatly reducing identity theft, lies in a number of combined strategies that must be implemented not only by consumers, but also by businesses, credit reporting agencies, credit issuers, and government agencies.

These strategies include:

Businesses

· Limit data disclosure. For example, a person's Social Security number does not necessarily have to be printed on staff badges, time sheets, paychecks, invoices, etc.

· Adhere to responsible information-handling practices, including proper document disposal (shredding).

· Train staff properly about how to handle sensitive information, and spot check to ensure compliance.

· Include responsible information-handling practices in business-school courses, even in schools when children are learning computer basics.

Credit Reporting Agencies

· Provide consumers with a free credit report annually upon request in all states.

· Provide the ability for consumers to "freeze" credit files, or as in Vermont, at least require affirmative consent of subjects before any credit reports are issued to customers of reporting agencies.

· Always give the consumer a copy when a customer obtains credit information about him or her.

· Conduct profiling and provide notice to a subject when unusual action is discovered.

· Demand that reporting agencies must be user-friendlier when victims call. A victim should be able to speak with a "live" person. Also, victims need one-stop shopping so they do not have to repeat attempts to clean up their credit history for each agency.

Credit Issuers

· Require credit issuers to be more diligent in reviewing credit applications. This includes conducting better identity verification, particularly when the address is reported as changed.

· Improve identity-checking procedures for "instant" credit, an option that is favored by identity thieves.

· Put photographs on credit cards.

· Reduce the number of pre-approved offers of credit mailed to consumers, and print the opt-out phone number prominently on all such offers.

Government

· Congress should strengthen the powers of the Social Security Administration giving them more teeth to deal with misuse of Social Security numbers.

· Congress can also strengthen enforcement of the Fair Credit Reporting Act.

· A clearinghouse should be maintained in each state for lost and stolen driver's licenses.

· Social Security numbers and other sensitive information from public records should be redacted, especially those available on the World Wide Web.

The success of the Slave Reparations flyer to attract many seniors to give out personal information simply highlights how vulnerable seniors are to exploitation by those utilizing deceptive, misleading, and false information. Unfortunately, the schemes and scams are as endless as a con artist's imagination. In fact, while I was preparing for my testimony before you today, several cities in Arkansas were being targeted by a Black Heritage Tax scam.

This scam is just the latest version of the Slave Reparations Act scam. In this version, descendants of slaves are led to believe that they are entitled to more than $40,000. They are asked to pay a fee to have an Internal Revenue Tax form filled out by an "expert," but the truth is that there are no provisions in the tax laws regarding such claims and any fee paid is simply money wasted. It's despicable that some con artists are stealing from innocent people by charging fees to prepare what they know to be baseless claims. Unfortunately, this is a reality today.

Our seniors, our greatest generation, need and deserve our protection. Through the combined efforts of local, state, and federal officials, and with the help and support of businesses, civic organizations, and consumer groups, all of us together can combat the misleading mailings and the con artists who prey upon our parents and grandparents.

EXHIBIT A                                                                                                                       

                                                                                                                  AUGUST 2000
ATTENTION

SENIOR CITIZENS

IF YOU ARE A "NOTCH-B-AB--Y" ,MEANING VOlf WERE BORN IN ~ THE U.S. BETWEEN 1911 AND 1926, THIS NEWS IS FOR YOU. YOu
MAY ENTITLED TO RECEIVE $5,000.00 DUE TO INEQUITIES IN YOUR SOCIAL SECURITY P A YMENTS. THERE IS A MEASURE ATTEMPTING TO BE PASSED, BUT YOU MUST BE REGISTERED IN ORDED TO RECEIVE IT. SEE THE FOLLOWING ARTICLE: #

SOME 11MILLION AMERICANS BORN FROM 1917 TO 1926 WILL RECEIVE mGER SOCIAL SECURITY BENEFITS UNDER A
BILL PROPOSED IN THE SENATE. TE BILL WOULD GIVE "NOTCH BABIES" THE OPTION OF RECEIVING mGHER MONTHL Y P A YMENTS FOR 5YEARS OR A $5,000.00 SETTLEMENT SPREAD OVER 4 YEARS. nrnSE AMERCANS HA VE BEEN RECEIVING A LOWER SOCIAL ..' c SECURITY AMOUNT THAN OTHERS.

                      SOCIAL SECURITY WILL CONT ACT "NOTCH BABIES", SO THEY SHOULD WITE TO
                                               

                                                     NATIONAL VICTIMS REGISTER
                                                  TREA SENIOR CITIZENS LEAGUE
                                                                  P.O. BOX 96472 '.
                                                    W ASlllNGTON, D.C. 20090-6472

                     TREA IS A SENIOR CITIZEN'S ORGANIZATION. YOu WILL NEED
                             TO PROVIDE THE FOLLOWING IN ORDER TO REGISTER.

NAME:
ADDRESS:
PHONE:
SS#:

Exhibit B

August 10,2000
                                                                                                               
            Any black person who is age 73 and older .
             Anyone born 1927 or earlier is in title to a
          .$5,000.00 payment from the Government.

            These persons need to sent their

Name

             Address
             Phone #
             S.S.#
             Date of Birth

                       TO:
            Nation Victiams
            TREA Seniors System League
            P .O.Box 96472
            Washington D.C. 20090-6472
            

You will not get it unless you apply for it.

Exhibit C

Exhibit D

February 8, 2001

NAME
ADDRESS
CITY, STATE ZIP

Dear:

Based on a recent investigation which originated in my office, your name was provided as a possible victim of consumer fraud as it relates to a bogus flyer that was circulating about a possible monetary settlement in connection with the "The Slave Reparation Act".

The investigation results, thus far, are as follows:

· The identified organization was erroneously collecting information in a well thought out membership effort to defraud African Americans by thinking they would receive a $5,000 check by simply returning a completed flyer; which included the name, address, city, state, zip, home phone number, social security number, and date of birth.

· I am sad to report that this is simply not true. Our investigation is still ongoing, so there is little more I can share at this time, other to let you know that over 20,000 citizens of the United States have responded to his scam.

As your Attorney General, I wanted to contact you to let you know that protecting your social security number, your date of birth, and all of your home contact information should remain at the highest of confidentiality and should never be shared unless it is unavoidable and only to companies or businesses you are familiar with.

I have enclosed a copy of the Consumer Alert issued by my office as well as a tip sheet as it relates to protecting your social security number. I hope that you will find this information helpful.

Should you have additional questions, please do not hesitate to contact me at the toll free number listed below. Also, please share this information with your friends and family in order to get the word out.

Sincerely,

Mark Pryor
Arkansas Attorney General

Enclosure: